What in the World is Going On????

What in the World is going on?

Today I have my “banker” hat on (I heard in a recent interview thay my contribution to Creative was the “banking”…I also remember managing operations, sales, R&D, administration and our Board of Directors. But that is a story for another day).

The world financial markets are in total spasm. Most folks I talk to are very concerned as 2008-2009 memories still run strong. After our fearless leaders in Washington have spent trillions to reignite the economy in the last two years, it is close to the flat line and unemployment is above 9%. The debt cieling debate gripped the world stage the last two weeks. The European Union is hemorrhaging and is on the verge of launching a new worldwide banking crises. What is going on and what do we do about it?

The US soverign debt was downgraded on Friday night from AAA to AA+ by Standard & Poors. Three years ago this would have been unthinkable! The US dollar is the world’s reserve currency. We are now in uncharted waters…no one knows how the downgrade will impact the world financial markets. The only comment I can make is it wont be good for the average person in America.

At this point I need to share that I am now officially an Independant with a Libertarian bend. The two dominant parties have melted together into spend with no limit to get re-elected entities. They have squandered our nation’s wealth in pursuit of non productive (counter productive?) spending. After all of the drama on the debt cieling, can you believe that the first year actual spending cuts amount to 24 billion? All of that huff and puff for a measley 24 billion? If you read the headlines from the mainstram media, Congress and the Presidnt “saved” the country. I will say that the “solution” put in place has guaranteed the problem will continue on and get worse. The problem is two fold: Overall debt is too high. Spending far exceeds revenue and will just add to the debt level. The two are joined at the hip…there is one solution to solve the problem.

Large cuts to our Federal and State governments must be made. It is that simple. Or is it? According to the figures I have seen, 51% of those who file a tax return pay zero in Federal income tax. They are net recepients of the system. They also have a vote come election time. Do you think they will vote for less? Do you think a politician running for office will offer less? Just in case you have not thought of the answer, it is NO. Sadly, the scales have tipped againt the free market system that allowed America to build itself into the envy of the world. We are now somewhere in between free market capitalism and socialism. And with every new effort our vote toting politicians make “to do something to fix the economy and create new jobs”, the more we are shifting to the socialist side of the equation.

Large and real cuts are the solution. Our “leaders” in Washington after all of that hard work came up with 24 Billion…what a joke. In fact the headline number of 2.1 Trillion in cuts is all less of an increase in projected spending and not real cuts at all. All of this means the debt level will go up which will continue to stifle the private sector and entice the government to do more to “help”. Its no wonder that the world is a hard place to understand.

It appears to me that there will be duel effects from what is unfolding: Reduction of debt levels in the private sector will be offset by increased government debt. This will cap the potential for economic growth and put upward pressure on unemployment. It will also cause housing prices to continue dropping. The second one is that as debt levels continue up with no real expense reductions, the US dollar will continue to lose its standing as the world’s reserve currrency and the price of hard goods that are traded internationlly (which is almost all of them) will rise. We have already seen inceased food and gas prices and they will continue to go up.

Spend less than you make. Think carefully about who you will vote for in the upcoming elections. The equity markets look vulnerable…cash isnt such a bad thing to have. Scary volatility is going to rule the day. And, make sure you stop and enjoy life with family and friends…we will make it through!

Regards,
Jim
PS. I wrote the above yesterday…what a day in the markets today. One interesting note: Gold rose to above $1700. Not at all a surprise…with the US Dollar vanishing as the reserve currency, there is no other replacement at this time. Except for Gold and Silver.

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About jimsnailblog

I am passionate about business, especially the Professional Beauty Industry and the Wine business.
This entry was posted in Investing/The Economy. Bookmark the permalink.

One Response to What in the World is Going On????

  1. Samantha Sweet says:

    I don’t always understand a lot of this Jim, but I feel blessed that I have your ear to ask questions if need be. You can all move to Number 1 if you ever need to LOL!!

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